Govt launches new $305M VC fund under SIDBI

Union Finance Minister Arun Jaitley today launched two funds by Small Industries Development Bank of India (SIDBI), a fund of funds with total corpus of Rs 12,000 crore.

The funds are Rs 2,000-crore India Aspiration Fund (IAF) and SIDBI Make In India Loan For Enterprises (SMILE) scheme with an investment size of Rs 10,000 crore.

“India is witnessing a start-up revolution and to harness the potential of India’s innovators and entrepreneurs a vibrant financial ecosystem is essential. The IAF is intended to play a vital role in this financial ecosystem,” Jaitley said.

“The fund is expected to catalyse tens of thousands of crores of equity investment in start-ups and MSMEs. The insurance behemoth Life Insurance Corporation (LIC) has also agreed to be a partner and co-investor in the fund,” he added.

“Various important initiatives taken by the government was sanguine that Make In India initiative with a conducive financial ecosystem will make India a manufacturing hub very soon,” the minister added.

“Fund amounting to Rs 20,000 crore has been sanctioned by the MUDRA Bank and we are targeting to take it to Rs 1 trillion,” Jaitley said.

The idea behind the launch of SMILE scheme is to provide soft loans in the nature of quasi-equity and term loans on relatively soft terms to MSMEs to meet the required debt-equity ratio norm as also for pursuing opportunities of growth by existing MSMEs, a SIBDI release said.

The focus will be on identified 25 sectors under ‘Make in India’ programme with emphasis on financing smaller enterprises with the MSME sector.

The Rs 10,000-crore SMILE scheme, which has built-in higher concessional terms for the enterprises promoted by scheduled caste (SC)/Scheduled tribes persons with Disabilities (PwD) and women, is expected to benefit around 13,000 enterprises with employment of nearly 2 lakh persons.

SIDBI will be providing 15 per cent of the total corpus which will be mobilised by the start-ups through various resources under IAF or fund of funds.

“We have already made a commitment of financing Rs 752 crore to the start-ups which will be further mobilising Rs 8,620 crore under IAF and we are expecting to provide Rs 2,000 crore under the scheme which was likely to mobilize fund to the tune of Rs 20,000 crore in future,” SIDBI chairman and managing director Kshatrapati Shivaji said.

“Normally we provide loan under the scheme under 2:1 debt-equity ratio. LIC has agreed to be a partner and co-investor in the fund,” he added.

“We will be providing funds under the scheme to sectors like IT, biotechnology and digital technology,” Shivaji added.